Chief Executive Officer David Cordani said on Friday that Cigna is ready to weather the government crackdown on pharmaceutical benefit managers even though its Express Scripts subsidiary depends on arbitrage and drug manufacturer discounts.
The bipartisan leaders of the Senate Health, Education, Work and Pensions Committees are expected to consider a legislative package next week that would ban arbitrage pricing and force PBMs to turn over all including discounts for employer customers. The Senate Finance Committee and two House panels are also considering legislation to rein in PBM.
Cordani said on a call with investors, Cigna’s Express Scripts subsidiary is the second-largest PBM in the market and generates 20 percent of pre-tax profits from rebates and retail spreads, a portion has decreased over time.
“We are confident we will be able to flex quickly if needed, but we also want to make sure that we are the voice of employers and will still work to give them choice in terms of employment.” how they fund their programs,” says Cordani.
The company increased its annual profit guidance by 10 cents to at least $24.70 a share after the company’s health insurance arm recorded lower-than-expected medical costs, due to high premiums. and lower spending on COVID-19, influenza and respiratory syncytial virus, Chief Financial Officer Brian Evanko said on the call. Cigna reported a medical loss rate of 81.3% for the first quarter, down slightly from 81.5% a year earlier.
Net income rose 5.8% to $1.2 billion, or $4.24 per share, and revenue rose 5.7% to $46.5 billion, thanks to higher premiums for health insurance exchange policies and increased pharmaceutical services.
Express Scripts served 98.7 million pharmacy patients during the quarter, up 4.6% thanks to new customers and growth in specialty pharmacy services for complex conditions like rheumatoid arthritis.
PBM recently introduced employer models that do not use arbitrage, through discounts and higher fees for rural pharmacies. Cordani said PBM is still assessing how Florida’s recent arbitrage ban will affect local contracts.
“We are confident that if some of these means of payment are altered due to changes in regulations or customer preferences, [Express Scripts] has an attractive range of value- and profit-generating capabilities,” said Cordani.
Cigna’s health insurance business covered 17.8 million US members in the first quarter, up 11.3% on exchange subscriptions, more than doubling to 786,000 after the company joined entered exchanges in Indiana, South Carolina, and Texas, and competitors exited some of Cigna’s markets. The company covered 16 million people on work-based health plans during the quarter, up 10%. Evanko said the insurer expects its employer membership to decline in the second half of the year as the risk of a recession looms.
Medicare Advantage memberships rose 6% to 584,000, below the industry average of 8%.
